Serviced Apartments Investment in Dubai Guide 2021
Author: Faizan Amin
Investing in the real estate market of Dubai is full of options, each as beneficial as the other. So with so many choices, one has the luxury of finding the perfect fit as per personal interests, understanding, financial requirements and other aspects.
Serviced apartments investment is one of the options on the table, which offers its distinct set of attractions and considerations. So after understanding what the industry is about, one can make use of this sector to good effect.
Hospitality Sector in Dubai
Dubai is the region's hub for travel, tourism and a lot of other business sectors. Expats from all over the world continue to flock into the city looking for better opportunities and lifestyle. There is also a great number of temporary visits, for business dealings and tourisms, with people seeking the best accommodation options. This keeps the hospitality sector of the city very vibrant throughout the year.
A simple Google search will enable you to understand the importance that hotels and other accommodation options in Dubai. There is a huge number of hotels, ranging from economy friendly choices to the most extravagant and lavish ones.
There are online booking systems and service providers which are always kept busy with the immense number of people looking for accommodation in Dubai. Along with hotel rooms, serviced apartments are also in high demand as they offer the perfect living opportunity for visitors and expats.
What is a Serviced Apartment?
A serviced apartment is an accommodation type which combines the features of a hotel room and a residential apartment. These units are spacious and have all the amenities and luxuries that a hotel apartment must feature, with layouts like general apartments having separate bedrooms and kitchens.
Serviced apartments come with varying facilities and features, and are available for short stays as well as longer ones.
These units are generally preferred by travellers and tourists along with expats having busy work schedules, which brings in a need for maximum luxury and hotel services. The services offered depend on the management company which is running a particular hotel apartment building, which generally outstrip those offered in usual residential towers.
Why Make Serviced Accommodation Investment?
Serviced apartments are a great choice for investors, as they equally appeal to those looking for short stays of a few days to those looking for longterm accommodations ranging from six months to over a year.
The high market demand and the increasing accommodation needs can ensure a never-ending, regular flow of rental income for the investors. With better services for the guests, these units are priced higher in comparison to other residential properties.
Comparison with Other Property Types
In a broad categorisation, the properties for investment can be categorised as residential properties, commercial properties and serviced hotel apartments. All types of property come bring varying benefits in the form of capital growth and rental returns.
Those interested in property investments need to look at all the choices, measure their benefits as per their aims and requirements and then make the right decision. Concerning serviced apartments investment, the average returns yielded by these properties bring an ideal investment opportunity for all.
Those involved in property management will know the attractions of investing in serviced apartments. Those who are new to the sector but interested in investing in real estate, here are some of the major benefits that define serviced apartments investment.
With a strong influx of tourists and expats, the demand for serviced apartments in Dubai is always quite high. This great demand leads to high occupancy rate, which ensures that you won’t have difficulty in finding tenants for your serviced property.
The apartments will be occupied mostly throughout the year and you won’t have long periods without getting returns. This factor is present in all the serviced apartment projects in Dubai, but you must do further research to find the areas which have higher occupancy compared to others.
Higher Rental Prices
Serviced apartments have higher rents compared to other residential properties. So for a similar purchase price, you can always expect a substantially greater from serviced apartments investment as compared to other types of investment properties. So those looking for good rental returns will find serviced apartments the best option for investing in real estate industry in Dubai.
Another benefit of entering the serviced apartments sector is that there is a well-established network which brings a regular influx of customers. Most expats and tourists are tech-savvy and make use of online portals for booking properties. This, along with the presence of local agents, can ensure greater ease of finding tenants without long periods of wait.
Serviced Apartments Investment for New Entrants
Property investments have to be carefully managed as a great sum of money is involved. Though the risks are lesser than other industries, well-researched and smart decision making can help in getting the highest returns on investment. For newbies, it is important to know about all the aspects of serviced apartments investment so they can get good value to their money, time and effort.
The first thing you should find out about is the financing options at your disposal.
You can apply for mortgage loans to finance the properties which can ease the burden of the investment substantially, as you simply have to pay about 15-20% of the purchase price in advance, while the rest has to be paid through easy instalments.
And as serviced apartments have high rental returns, you can simply rely on the property to finance itself further.
Once you invest in a serviced apartment, you can offer it with two types of lease agreements. The choices are:
As the name suggests, these lease type is applicable when you wish to offer your property for short periods, like for tourists that wish to stay for a few days or weeks. This lease type is useful when you wish to put the property to your personal use and don’t want it to be occupied all the time.
In a long-term lease, you can give the property to tenants just like general rental apartments to continue getting the returns on your investment. As the market has a strong demand for serviced apartments, you should go for this lease type if you wish to get continuous earning and don’t need to use the property personally.
Things to Consider
If you are just starting out in property investments, you need to look at a lot of aspects to understand how the industry works and how you can maximise your benefit. Here are some of the factors you must look at:
- The balance of prices and rental yields varies in different areas of Dubai, so you should carefully study all the options available and select the district which can serve your interest in the best possible way.
- The property developer whose property you are buying can also impact the demand, and hence, your returns. So it is vital to invest in a property by a leading developer like DAMAC.
- There are legal obligations to be met, firstly, to buy the serviced apartment, and then to offer it to the tenants. All the purchase and lease agreements are regulated by the Dubai Land Department, so it is advisable to learn about all their requirements before finding the property so you can fulfil them.
- To reduce the risk and burden of investment, one can always look towards the mortgage financing options available in Dubai. The financial institutions and banks offer attractive mortgage rates, through which you can conveniently finance the property. DAMAC Mortgage assist can help you find the lowest mortgage rates for serviced apartments investment for their properties.
- Serviced apartments have higher rental returns, but lesser capital gains compared to other properties. So if you are interested more in the rental income, serviced apartments are the best among all types of investment for you.
Serviced apartments investment offers an attractive choice for all investors. One can enjoy huge returns on their investments if the right properties are invested in. Mortgage financing can be helpful to invest in properties of much higher value than your current capital, which can be easily paid of using the handsome rental earning that comes with serviced apartments.
Frequently Asked Questions
Are serviced apartments profitable?
Serviced apartments are highly profitable in terms of rental income as they have higher rents and occupancy rate compared to other property types. In terms of capital growth, they score less than properties like residential apartments, villas, penthouses, and townhouses.
What is the difference between apartment and serviced apartment?
A serviced apartment has all the features of a regular apartment, like layouts with separate bedrooms, kitchens, living rooms and balconies. Along with that, they are fully equipped and furnished and come with hotel facilities like room service, cleaning etc.
These hotel features differentiate serviced apartments from the usual residential apartments. For investors, another differentiating factor is that serviced apartments offer higher rental yields.
Is service apartment considered residential or commercial?
From an investor’s perspective, serviced apartments are considered commercial properties as they are purchased with the sole purpose of earning rental income. Even when you are applying for a home loan, you can go for a commercial mortgage loan as the properties are capable of yielding good returns.